Key facts
- Gold prices extended gains, trading above $4,100 an ounce, supported by dip-buyers.
- Escalating US-Iran tensions and Houthi threats in the Red Sea are pressuring markets.
- Crude oil prices have surged due to renewed hostilities and risks to supply routes.
- Central bank gold purchases continue to provide a steady floor for prices.
- The US dollar strengthened and Treasury yields rose, typically weighing on gold.
- Gold ETF holdings saw significant inflows, indicating renewed investor interest.
Gold prices extended their gains, trading above $4,100 an ounce, as dip-buyers emerged to counter inflation fears stemming from escalating Middle East tensions. Renewed hostilities between the US and Iran, coupled with threats to shipping in the Red Sea by Houthi militants, have fueled concerns about energy supply and broader inflationary pressures.
Crude oil prices have seen a significant surge in July following the resumption of conflict, with prices exceeding 7% on July 8 after the collapse of a US-Iran ceasefire. This geopolitical flare-up has amplified inflation worries, leading to speculation that the Federal Reserve may maintain a restrictive monetary policy for an extended period. The US dollar has strengthened, and Treasury yields have risen, which typically puts downward pressure on non-yielding assets like gold.
Despite these headwinds, gold has found support from central bank purchases. The People's Bank of China reported its 20th consecutive month of gold accumulation in June, adding approximately 15 tonnes, while Poland acquired 82 tonnes in the first half of 2026. Analysts at HSBC maintain a bullish long-term outlook for gold, citing structural fiscal deficits and geopolitical risks as drivers for sustained official demand.
Exchange-traded funds (ETFs) have also seen renewed interest, with total gold holdings rising by about 7.4 tons on Tuesday, marking the highest daily inflow in over a month. Analysts suggest this indicates a potential breakout following a period of reduced volatility, with buyers successfully defending the $4,000 an ounce level. However, market participants are closely monitoring upcoming US inflation data, including CPI and PPI reports, which could influence the Federal Reserve's policy decisions.